Billy Joel said it pretty well in his song, The Entertainer:
But if I go cold, I won’t get sold.
I’ll get put in the back in the discount rack,
Like another can of beans.
ZipRealty, one of the pioneers of online real estate, and still one of the most popular search sites on the web, has created their own “discount rack” of homes with big discounts from their original list prices, giving buyers a way to find homes that are 10%, 25% and 40% off of their original list prices.
I suppose this is their attempt to draw excitement towards home listings that haven’t sold, which is what home marketing is all about. However, this promotion seems flawed in so many ways that is doesn’t help buyers or sellers to make intelligent buying and selling decisions.
- Find a great deal on your next home – This ad implies that that just because a home is 10%-40% off of its original list price that it must be a great deal. I have worked with enough sellers in the past couple of years to know that some of them are living in a fantasy world about the value of their home. A seller who believes their home has appreciated by 15% when the rest of the home values in the city have declined by 20% is still overpriced, even at 40% off of their original list price.
- Price reductions do not equal a great deal – Some of the best deals that we’ve seen in the past few years are on homes where there were no price reductions at all. The homes came on the market at a great price and sold quickly. No price reductions necessary. In fact, when buyers recognize great deals in this slow market they still bid up prices over list price, and still get a great deal.
- Home listings go stale when they are overpriced – Sellers worry that their listings will become stale if they are the market for too long. However, our experience shows that even a stale listing will sell when it hits the right price point. As soon as you enter a price territory that is intriguing to buyers, you will start getting traffic and eventually an offer. Get the price right to begin with and you don’t have to be put in the “discount rack” with lots of price reductions.
- Great deals are relative to the rest of the market – Only by comparing a listing to recent, similar sales and market statistics can you gauge whether a home is a great deal or not. Looking at it in isolation based on how much they have reduced their original listing price tells you nothing.
If you are motivated to sell your home in a reasonable amount of time, you want to do everything you can to avoid being put in the “discount rack.” If you get the price right to begin with, your marketing time will be shorter, and you don’t have to go through months of 10%-40% price reductions. The price you get may not be what you had hoped for, but that is the reality for every single person in the country right now.
I can almost guarantee that the financial results from your sale will look better if you price the home aggressively and get it sold in a month, versus a scenario where you overprice by 40% and spend 8 months trying to get down to the right price. Buyers negotiate harder and demand more concessions when you have been on the market forever, so you need to start the process by standing out from the other “cans of beans.”